Borrowing Money from a Credit Union: What You Should Know

A credit union can be a great place to go when you need to borrow money quickly because of their low interest rates and flexible terms. It is important to learn as much as possible about these financial institutions before going out and getting a loan. The more you learn about credit unions, the better of a position you will be in when it comes to borrowing money. Whether you need a mortgage or a small personal loan, this is one option that you should explore.

What are Credit Unions?

A credit union is established by communities with members who typically all live in the same geographic area. Sometimes all of the members of a credit union belong to the same trade. Any profits that a credit union makes go towards benefiting the members. These days most credit unions offer online and mobile banking options.

Becoming a Member of a Credit Union

When you are trying to find the right credit union to join, you will need to look at some of the different ones in your area. It is important to choose a credit union that will meet your specific needs and requirements. We recommend that you go on the official ABCUL website to see what your options are like where you live.

You can simply submit your postcode to get a list of these financial institutions. A lot of credit unions allow people to stay members even though they aren’t fully active. In other words, you won’t have to maintain a minimum balance like you would with a bank.

Reasons to Join a Credit Union

There are plenty of different reasons to consider becoming a member of a credit union. It can be very beneficial when you need a loan. You will most likely be able to get a secured loan for a house or car at a lower interest rate than with a bank. These financial institutions typically do more to help their members than banks when it comes to saving. You also may be able to get help with certain types of financial issues.

You will never have to worry about a credit union giving money to you if they don’t think you can afford to pay it back. They are legitimate lenders that will look at your credit history, income and other things before giving you a loan. There is a maximum amount of interest that these places can charge their members, which is also nice.

What can I get from a Credit Union?

Most credit unions offer basic accounts for checking and savings like any ordinary bank. You will be required to pay a little over one pound each week, which goes towards the costs of your account. There are no late fees that you will have to deal with if you don’t pay the fee on time, but you must keep up with it to keep your account active.

Getting a Loan from a Credit Union

You can get a loan from a credit union for as little as fifty pounds all the way up to 3,000 pounds. This is one of the big draws of these financial institutions, as banks don’t typically give out such small loans. You could end up getting an interest rate of six percent each year, but the average is about twelve percent. This means a decent return on the loans you take out through a credit union.
One of the great things about getting a loan through a credit union is that the interest rate decreases the closer you get to paying it off. If you consistently make your payments on time, you won’t have to pay as much interest overall. If you are unable to get a loan from a big bank, this is an excellent alternative.

Loan Terms

If you get a secured personal loan from a credit union, you could have as long as ten years to pay back the money. This all depends on the amount of money that you borrow and what your credit is like. A lot of credit unions throughout the UK have started offering short-term loans that range from 100-500 pounds that must be paid back in two to four weeks. If you have some important expense you need to cover right away, this could be an option worth looking into.


The dividend rates that credit unions offer their members typically range from 1 to 3%. You should take the time to see what each of these credit unions in your area offers in terms of rates. This is very important information to get before you decide which place to sign up with. You could potentially get a rate as high as eight percent, though it is fairly uncommon.

Best Tips for Financing a New Car

If you want to buy a new car, there are some financing tips that can help you get the best possible deal. This is probably one of the biggest purchases you will make in your life, so it just makes sense to take a cautious approach. There are numerous expenses associated with buying a car, and it can get very expensive very fast. The method you choose for financing your new car will ultimately determine how much you pay and how smoothly the entire process goes.

Cash vs. Savings

It is always better to use cash when buying a car, even if it is just for the initial deposit. Make sure that you put down at least 15-20% on your car so that you can get the lowest possible interest rate. You might always want to consider dipping into your savings.
You need to make certain that you have enough money set aside after you have purchased your car in case any repairs need to be done. This is especially important to consider if you are going to buy a used car. Take some time to sit down and determine whether or not you can afford to use some of your savings to buy a car. The last thing you want is to be stuck in a bad financial situation soon after everything is wrapped up.

Get a Personal Loan

A lot of people get a personal loan to pay for a new or used car. This can be a very effective financing solution, but there are a few things to keep in mind. If you successfully pay off the loan, your credit will improve dramatically. Those who don’t already have good credit can still likely get a loan, but their interest rate will be significantly higher.

The best thing you can do is to spend some time shopping around with different lenders so that you can get the lowest possible interest rate. A credit union is a good place to go for a personal loan, as they tend to offer the best deals.

These days getting a personal loan can be done fairly quickly and easily online. This means that you won’t even need to leave your home to get the loan you need. If you already have a loan that you are paying off, there is a chance that you might not be approved for another one. Look at your credit rating to see what it is like before you start applying for a personal loan.

Hire Purchase

Another option you have when it comes to financing a car is hire purchase. This option will require you to pay at least 10% of the total purchase value of the car up front. You will then have to make payments each month at a fixed rate over a certain period of time.

Setting up a hire purchase agreement is typically a fast and easy process, as it is done entirely through the dealer. This is a good option to explore if you don’t have a lot of money to put down on a new car. The repayment periods for hire purchase loans range from a year to four years on average.

It is important to keep in mind that you will not actually own the car until you have made your last payment on it. This can cost you more than other financing options. Because you will have a longer term, you will end up paying more interest overall.

Personal Contract Purchase

A personal contract purchase or PCP can help you save money in the long term because you most likely won’t have to pay as much interest. You will receive a loan that covers the difference of the vehicle’s brand new value and what it will be worth at the end of the loan term.
This option is a good idea for numerous reasons, including the fact that you can choose to trade the car in when the agreement period is over. You can also choose to make a lump sum payment and keep the vehicle if you want. Most people who choose this financing option get lower monthly payments and don’t have to put down as much.

One of the drawbacks to personal contract purchase is that you will need to pay extra if you go over the agreed upon mileage limit. There is also a chance that you could spend more than with hire purchase by the end.

Final Thoughts

Before you decide on a certain method of financing a new car, it is important that you examine each of these options closely. You should try to use some of your savings to buy the car if you are able to. Those who don’t want to put down a big deposit should consider hire purchase or personal contract purchase.